risk-free return

Risk-Free Return

The return on any investment with such low risk that the risk is considered to not exist. A common example of a risk-free return is the return on a U.S. Treasury security. The risk-free return exists in order to compensate the investor for the temporary tying up of his/her capital, even though it is not put at risk. See also: Capital Allocation Line, riskless investment.

risk-free return

The annualized rate of return on a riskless investment. This is the rate against which other returns are measured. See also excess return.

Risk-free return.

When you buy a US Treasury bill that matures in 13 weeks, you're making a risk-free investment in the sense that there's virtually no chance of losing your principal (since the bill is backed by the US government) and no threat from inflation (since the term is so short).

Your yield, or the amount you earn on that investment, is described as risk-free return. By subtracting the risk-free return from the return on an investment that has the potential to lose value, you can figure out the risk premium, which is one measure of the risk of choosing an investment other than the 13-week bill.

References in periodicals archive ?
In some cases, the risk-free return for such a transaction financed with borrowed money can exceed 10 percent after deducting loan and storage costs.
My heretical disrespect for the saver is because he, she (and I) demand a risk-free return from the economy and there is no such thing.
EBD has streamlined the online shopping experience for prescription glasses by providing customers with impeccable customer service, a virtually risk-free return policy and a customized Eye Try feature.
5% yield on German bonds is more likely to be a return-free risk than the risk-free return that many currently assume.
The prohibition of a risk-free return and permission to trade, as enshrined in verse 2: 275 of the Holy Qur'an, makes the financial activities in an Islamic set-up real asset-backed with the ability to cause 'value addition'.
In short, the return on a risky investment may be decomposed into pieces of "embedded" risk and return: the risk-free return and the expected return to risk bearing.
Considering that investors (creditors) have several options for investing their capital, they will opt for the investment type offering a risk premium, the rate of return in excess of a risk-free return rate.
Employing cutting-edge Security Technology, Great Savings, 100% Secure Payment Methods, Risk-Free Return Policy, and Free Worldwide Shipping, JAWHARTY.
By dividing the average return of the portfolio in excess of the risk-free return by the standard deviation of the portfolio, we get the Sharpe ratio (given by Equation-5) which measures the risk premium earned per unit of risk exposure.
f] be the amounts of money the individual saves and invests in a risky and a risk-free asset in period 1, providing him with a risky return R and a risk-free return [r.
If government bonds are meant to represent the risk-free return, then doubts over their security could undermine the valuation of other assets, so it is worth pausing to consider whether government bonds do represent a risk-free return and whether the concerns about them are overdone.
Make sure that the minimum hurdle rate is a reasonably risk-free return of around 10-15 per cent per annum.